Gas: A double-edged discovery

Tuesday, 4 October 2011 00:00 - - {{hitsCtrl.values.hits}}

SRI Lanka has discovered gas. The sentence by itself is history-creating, but this fact alone does not mean economic prosperity.

There are many reasons to be cautious. One is the fact that there are many examples in the world where oil and gas deposits have not bought happiness and equitable development to countries. One of the best examples of this would be Nigeria, where its oil turned out to be a curse more than a blessing and its socioeconomic landscape is still peppered with disturbing political and cultural issues. Beset on all sides by AIDS, a tyranny and exploitation of its oil resources, the average man gained little from the ‘black gold’ beneath his land.

Despite the announcement of a gas field here, it is still unclear if this is commercially viable. Prospecting for oil and gas is an arduous, time-consuming and very expensive task. It is not yet clear exactly when and how oil and gas fields in Sri Lanka can be plugged into the national economy. How will they drive growth? Will Sri Lanka have access to oil at lower prices than the international market? What kind of assistance will the common man gain from this discovery? What tax benefits or other income will the Sri Lankan Government get from the discovery? True, five more blocks off the Mannar coast will have more enthusiastic bidders, but what does this mean in real terms for the country?

Another point to be considered is that Sri Lanka is wholly unprepared to deal with the outcome of gas and oil discoveries. Do we have the right legal, political and policy frameworks in the country to ensure that these benefits are used for the good of all Sri Lankans? Will the income gap become even larger with the rich getting richer off the profits of oil while the rest struggle? How can the Government best channel the resources from giving out the remaining five blocks to the growth of the country as a whole?

The massive oil spill in the Gulf showed to the world what risky business oil pumping is; if there are any leakages, the environmental fallout will take decades to recover. With ecological concerns taking a backseat, it is even more important to consider the triple bottom-line outcomes and ensure that these are taken into consideration when companies enter the gas and possible oil market in Sri Lanka.

If anything, what this discovery has resoundingly reiterated is the need for open dialogue, transparency and good governance in both the private and public sector. America is famous for giving heavy subsidies to oil giants and letting the people pay the price. Nigeria has lost its potential because of oil – clearly this is a sword that can cut both ways.

Ideally oil should be a boon for the people of Sri Lanka. It should be a chance for the businessmen to get cheaper fuel and for the Government to make a larger income to be channelled into helping the average man. Conversely it could be for corrupt politicians and robber barons. The question is, which way will Sri Lanka lean? The outcome of this decision will go a long way in deciding the country’s future.